Upper Tribunal rules on proper application of totality principle to imposition of financial penalties for multiple housing offences

The Upper Tribunal (Lands Chamber) has removed a housing licensing penalty imposed on one member of a married couple and reduced the penalty on the other.

The appellants were a couple who own a flat in Camden. Although rent was paid into their joint account, the husband played no role in managing the property and should not have been penalised, deputy chamber president Martin Rodger KC said.

He said in his ruling that the appeal mainly concerned the proper application of the totality principle to financial penalties for multiple offences under section 249A, Housing Act 2004 and the treatment of joint owners only one of whom was responsible for the letting and management of the property.

Camden imposed penalties totalling £27,000, split equally between the husband and wife.

They appealed to the First-tier Tribunal, Property Chamber, which reduced the penalties to £8,000 and £13,000 respectively.

Camden owns the freehold of a house in which the wife bought the lease on a four-bedroom flat in 2002, which she registered in the couple's joint names.  

In 2022 a prospective tenant complained that the deposit requested was greater than the five weeks allowed under the Tenant Fees Act 2019.

Camden housing officers made an unannounced inspection and decided the flat was an unlicensed HMO with a number of safety defects that breached the 2006 Management Regulations. 

Just after Christmas 2022 Camden served five notices on the couple totalling £13,500 each.

They appealed on the basis that their lack of knowledge of the council’s additional licensing scheme provided a reasonable excuse for their failure to licence. 

The couple also said that although the flat was held in their joint names and the rent was paid into their joint bank account, the wife was the person responsible for managing it.

The FTT dismissed their defence of reasonable excuse but reduced the penalties.

Mr Rodger said he faced two broad grounds of appeal.

Firstly, the couple said the FTT erred in law when deciding to impose a financial penalty at all, when a proper application of the council's policy should have resulted in a warning.

Secondly, they said the FTT erred in determining the penalty by failing to treat ignorance of the licensing requirement as a significant mitigating factored and by treating the seriousness of the deficiencies in fire protection as an aggravating factor in determining the penalty for the licensing offences at the same time as imposing separate penalties for the same condition as breaches of the 2006 Management Regulations.

They also argued that the FTT failed to take proper account of the husband having very little to do with the management of the flat.

Mr Rodger said Camden considered both appellants were persons in control of the flat and that each was managing it. 

“In [the husband's] case the suggestion that he satisfies the description in section 263(1) of being a person who ‘receives the rack-rent of the premises’ is much more problematic,” Mr Rodger said.

He noted the tenants paid rent into the couple's joint bank account, but the letting was by the wife alone, and she recorded the full rental income on her tax return. 

It should not be thought that rent which one of a married couple is entitled to receive but which is paid into their joint bank account is therefore necessarily received by both of them, Mr Rodger said.

He said: ”The first difficulty I have with this part of the FTT's decision is that, while it acknowledged [the husband's] limited involvement, it did not specifically address the possibility that the appropriate penalty in his case might be a warning. 

“Having failed to distinguish between the couple when considering [the] submission that the council's policy pointed towards a warning, and having not at that stage made any assessment of [the husband's] culpability, the FTT did not glance back when reducing the penalty and consider whether the factors which justified a reduction might also be applicable to the principle of whether a penalty should be imposed at all. “ 

He said the second problem was that the separate positions of the couple were not reflected in any adjustment to the penalties for the breaches of safety precautions.

“Despite finding that responsibility for day-to-day management rested with [the wife], and not with [the husband], the FTT did not make any adjustment to the penalties of £5,000 and £1,500 imposed on each of them for the two offences,” Mr Rodger said.

“It did consider whether it should make any adjustment but decided not to, giving as its reason: ‘The Tribunal has decided not to vary but to confirm the other two sums because, taken by themselves, they are proportionate to the offences committed’. 

“No explanation was given why the same penalty was ‘proportionate’ notwithstanding the different responsibilities of the couple, which had justified a substantial reduction in [the husband's] case for the licensing offence.”

Mr Rodger said there was “a clear error in the FTT's reasoning, and that in considering whether the punishment to be imposed on an offender is just and proportionate, it is irrelevant that another offender is also to be punished for the same offences”. 

He said: “This error casts doubt on the whole of the FTT's assessment of penalties, but it is particularly problematic in relation to the importance of assessing the responsibilities, actions and circumstances of each appellant separately. 

“The fact that the FTT lumped together the penalties to be imposed on [the husband] and [the wife] and asked itself whether the total sum was proportionate, rather than asking itself whether it was appropriate to impose any penalty on each of them and, if so, how much it should be, fortifies my conclusion that it did not give proper consideration to the case against [the husband].”  

Turning to the quantum of penalties, Mr Rodger said: “There is force in [the] complaint that in treating the licensing offence as aggravated by the fire safety issues, and then imposing a separate penalty for the fire safety offence, an excessive total has been arrived at”. 

He set aside the FTT's decision to impose penalties totalling £13,000 on the wife and substitute the two penalties totalling £8,000 for the wife and said no penalty was appropriate in the husband's case. 

Mark Smulian